Joseph R. Pitts, May 14, 2004

Small businesses generate the bulk of new jobs -- about 75 percent of them, according to the United States Small Business Administration. These firms employ more than half of private-sector employees, including a significant portion of the high-tech workforce. They represent the backbone of our economy.

Currently more than forty-one million Americans have no health insurance. Many of these Americans -- 60 percent or more, by some estimates -- work for or depend on small employers who lack the ability to provide health benefits for their workers.

While access to resources is a concern, skyrocketing health care costs make it virtually impossible for small businesses to offer decent health care coverage for employees.

Large companies enjoy a competitive advantage in the provision of benefits to their employees. They can leverage their size -- thousands of employees, operations in multiple states -- to bargain for better rates on health insurance for their employees. A small business owner has no such luxury. A plan the House approved this week would change that.

H.R. 4281, the Small Business Health Fairness Act allows small business owners to partner with other owners to purchase health insurance, creating Association Health Plans (AHPs). AHPs allow bona-fide trade associations to offer health insurance plans to their members, across state lines. This would offer small businesses the bargaining power of a large corporation.

If enacted, the plan would allow small businesses to offer their uninsured employees big company benefits. A recent survey showed that ninety-three percent of Americans support this legislation.

The Congressional Budget Office has estimated that small businesses obtaining insurance through AHPs would receive premium reductions of 13 percent on average with a savings range of 9 to 25 percent.

An Association Health Plan (AHP) is a group health plan that offers fully-insured and/or self-insured medical benefits, has been certified by the Labor Department, and is operated by a board of trustees with complete fiscal control and responsibility for all operations.

To be certified by the Labor Department, a "self-insured" AHP must have at least 1,000 participants and beneficiaries. The self-insured AHP must have also offered coverage on the date of enactment, represent a broad cross-section of trades, or represent one or more trades with average or above health insurance risk.

The bill requires all employers participating in the AHP to be members or affiliated members of the sponsor, the association. All individuals under the plan must be active or retired employees, owners, officers, directors, partners, or their beneficiaries. This applies to partnerships and self-employed individuals.

H.R. 4281 makes clear that AHPs must comply with the Health Insurance Portability and Accountability Act (HIPAA), which prohibits group health plans from excluding high-risk individuals with high claims experience. Thus, it will not be possible for AHPs to "cherry pick" because sick or high risk groups or individuals cannot be denied coverage.

The measure expressly prohibits discrimination by requiring that all employers that are association members are eligible for participation, all geographically available coverage options are made available upon request to eligible employers, and eligible individuals cannot be excluded from enrolling because of health status. The bill prohibits AHPs from charging higher rates for sicker individuals or groups within the plan, except to the extent already allowed under the relevant state rating law.

In addition, H.R. 4281 requires the Secretary of Labor to consult with the states about the regulation of AHPs located in their state. It establishes criminal penalties for willful misrepresentation as an exempt AHP or collectively bargained status; authorizes the Department to issue cease activity orders against fraudulent health plans; and outlines the responsibility of the board of trustees for meeting required claims procedures. The Labor Secretary must report to Congress no later than January 1, 2008, on the impact of AHPs on reducing the number of uninsured.

As our economy changes and small business continue to employ the vast majority of our workforce, we must develop ways to allow them to provide the benefits their employees need.

This plan would do that. It would go a long way towards decreasing the number of uninsured and give small businesses a vital tool to take care of their employees.

Congressman Joe Pitts, a Republican, represents Pennsylvania's 16th Congressional District, which includes Lancaster County and parts of Chester County and Berks County.